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Opinion: The Pentagonâ€™s Real Innovation Problem

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The U.S. Defense Department’s recent outreach to Silicon Valley for access to commercial innovation is understandable. Secretary Ash Carter’s determination to access innovative technology is laudable. However, the crux of the issue is not better access to innovation but less burdensome acquisition of innovation.

The Pentagon has had access to the world’s leading commercial innovation since the mid-1990s, when Congress passed the Federal Acquisition Streamlining Act (FASA). Subsequently, Federal Acquisition Regulation (FAR) Part 12 created a Defense Department acquisition framework that recognizes the value of commercial investment and technology for military application.

Acquisition Headaches

Focus is on restricting profit, not value to government

Intellectual property is difficult to protect

Congressional intent is not recognized

These reforms enabled Rockwell Collins to eliminate redundancies between our commercial and military business units. For example, by starting with commercially developed products, Rockwell Collins saved the Pentagon more than $160 million in the development of the Common Avionics Architecture System that was incorporated on the H-60 and CH-47 Chinook helicopter fleets. And our state-of-the-art cockpit displays developed commercially for the Boeing 787 were subsequently modified for military use on the KC-46 tanker.

This was good news. The problem, however, is that military acquisition of commercial innovation is increasingly challenging, and this is an industry-wide issue. In 2014, a Defense Business Board report said the entire industry’s ability to provide the military with leading-edge commercial technology is under increasing threat.

Here’s why. FAR Part 12 states that as long as a product is “of a type” that is currently commercial, then the Pentagon must classify the product as commercial. The military version of the commercial product can be designed a little differently, but if it is “of a type”—or similar—then it is a commercial product under FAR Part 12 regulations. This distinction is very important, because few commercial items can be used by the military as-is, with no modification for their specific needs.

Everything works well as long as the military item is classified as commercial. But when products are classified as military items—and excluded from FAR Part 12—the manufacturer is subject to overly burdensome cost-based accounting, and the government is responsible to pay for items such as obsolescence management and the addition of ongoing, commercially developed innovation in that product.

In essence, this separates the military’s product from the commercial item and often requires the addition of a distinct, low-volume production line for a special customer. This limits the manufacturer’s ability to generate a return on R&D investments of tens or hundreds of millions of dollars.

How many commercial companies would view this as an attractive business proposition? It would be a dispiriting and needless loss if the independent and entrepreneurial personalities that founded Silicon Valley startups were to conclude that working with the Defense Department comes with too narrow an interpretation of what a commercial item is.

To that point, the Senate Armed Services Committee’s report for the defense authorization for fiscal 2017 clearly sums up the committee’s unease regarding the Pentagon’s approach to commercial products: “The committee is concerned about the Department of Defense’s increasingly narrow interpretation of the definition of commercial items . . . . If there is a problem with the definition, it appears to be the Department’s repeated attempts to narrow the definition to conform to an oversight strategy that will inadvertently lead to less competition [and] increased costs.”

Until these concerns are addressed, the Pentagon will face ongoing challenges with acquiring commercial industry innovation in an efficient and cost-effective manner—whether that innovation comes from Silicon Valley or Cedar Rapids, Iowa.

However, there are steps the Defense Department can take to ensure its outreach to commercial industry is a success:

•Regulations. Recognize the congressional intent of the broad definition of a commercial item—particularly commercial “of a type” products and the fact that prior commercial determinations should be allowed to carry forward.

•Training. Train the acquisition workforce in the meaning, importance and congressional intent of the FASA and FAR Part 12.

•Intellectual property. Protect intellectual property (IP) aggressively. The current acquisition environment is creating barriers to the acquisition of commercial technologies, as companies invest, take significant risk to develop products and then are made to give away their valuable IP to competitors.

•Value. Shift the discussion away from restricting commercial profit and focus on the value received. When the Pentagon buys commercial items, it benefits from sunk R&D costs, ongoing obsolescence management, technology insertion and further R&D expenditures, which are managed by the commercial company as a part of its business model. Companies and their shareowners deserve a return on this investment.

Despite the need for the Pentagon to do more, it is important to recognize that we are all working toward the same national goals—to provide the best product at the best value for the taxpayer. This dedication helps to ensure that our uniformed men and women will always have the most innovative, leading-edge technology to defend the freedoms we cherish.

Philip J. Jasper is executive vice president and chief operating officer for government systems at Rockwell Collins.

Editor's Note: The photo caption was edited to clarify the derivation of the Common Avionics Architecture System displays.

Discuss this Article 24

In my comment on the A-10 replacement I spoke about the complexity of stockholders and politicians in the procurement process, and this is another example of a dysfunctional process. Its time to get back to basics or nothing will ever get done. Signing documents the size of the NAFTA agreement to build anything is a formula for disaster.

That same candidate which numerous articles on aviation week point out would be a disaster for aviation with insular or poorly thought through populist policies.

Being involved in commercial real estate doesn't mean that you know anything about IP/technology/export control/obsolesce/security/international cooperation. Working with the US on anything remotely military is a nightmare to US export control and citizenship based eligibility requirements for people working in certain areas.

If we were talking about candidate Elon Musk (Born RSA) then maybe I might agree with you, but the only market Trump has disrupted is electoral politics and then in a bad way.

I've been listening to the innovation "problem" for 40 years. The real problem is that innovation is the enemy of bureaucracy. The Department funds bureaucracy generously; it funds innovation miserly. Talking innovation in countless speeches and reports is useless without incentivizing the A&D industry to go after it.

Paladin: thought what you wrote was insightful; it took me back to my Pentagon experience advocating for innovative ideas, materials, and technologies Occasionally, I grew exasperated at what I viewed as the building's seemingly organic bias against things, ideas, technologies "new". What reassured me was that such perception was inaccurate. For example, DoD's Strategic Capabilities Office is itself an innovative OSD office that is effectively getting after innovating, innovators, and innovations. But, back to my staff days, I encountered people not against innovation per se but who either needed assistance and opportunity to wrap their minds around why the "new" (innovation) was superior, or they were unsure if "new" was in DoD's best interests. Sure, there are critiques galore WRT the FARs, process, and acquisition miscues. Searching for new ideas is important, but we know stuff is not pioneered or perfected within the 5 walls or any other government office. IMHO, department personnel, and decision makers ought to be taught why "new" is important, needed, and how to glimpse the possibilities in innovators and their creations. And if that search takes DoD outside of itself, fine. But IMHO if we do not first fix thinking, the searchers for innovation will return empty handed and declare that innovation searches are a waste of effort. Thanks.

Another little problem arises if a contractors uses innovative technology on a government procurement, then a big 'rights' problem can arise.
The government insists it owns the technology in the delivered product.
It also works the "rights issues" even on Independent Research and Development (IRAD) if profit money from Gov't. Programs is funneled back into IRAD.
Not exactly an inducement for companies to innovate.

Does this mean that if a company e.g. Rockwell Collins develops a super dooper new cockpit display or whatever. That just might fit nicely in the B-21, or an updated A320/B737 any DoD RFI would automatically go into the circular file. On the chance of selling 100 rather than 5000?

In clinical psychological parlance, repeatedly engaging in conduct (behavior) that inherently defeats achieving a desired result or goal, time after time, ad nauseam, constitutes "psychotic" behavior.
Thus, the continual, repetitive, course of conduct described in the article, if accurate, formally constitutes, "Bureaucratic Insanity".
Absolutely. Irrefutably. Repeatedly engaging in self-defeating behavior is the quintessential personification of an insane psychosis.

If a "rational" process is to be achieved, it's going to require rational humans to lead the process ie. Humans without hidden agendas, humans that are morally fit, humans that are not beholding to others with cross purposes because big money is theirs' if they are so beholden, humans with whom honor is sacred, and virtue safe.
Needless to say, I see no reason for optimism the difficulties the Article raises will be resolved any time soon. The overriding fact that our Country would benefit greatly if they were means little or nothing that those involved or the difficulties would have been worked through long ago.
Sorry. But we can always hope.

In every country the pandemic illness is administration, sucking resources everywhere apart where it is needed research and development and testing. Instead we end up in worst than obese administration like cancer metastasizing and spreading fast and killing the patient! Cut half of worldwide administration and local agencies and you'll get your money to put good R&D and being able to fulfill their duty!

Agree with all the good messages above, and specially aalexander if the wasted funding of governments hidden agendas was dealt with,(we could go for a while on this one), we would have more to deal with. Yet in the aviation field with economies being what they are presently on the highest cliff everseen before, wanton waste must be dealt with by the oversized governance. We all in each and every country within the "Big 10" must look at the overall fiscal debts the tax paying lower class are dealing with and in saying that it imperatively must downsize itself to the economic reality of bankruptcy. The big players in the aviation industry after milking the public for so long had better give their heads a shake as far as FAR pt 12 goes and expect situations like that to be a reality thru the future as downsizing will inevitably happen, and I would see a bartering process to eliminate some of the basic wording invoked with the particular issue, but needless to say there has to be some serious ongoing guarantees with the military implications of leading edge technologies, that render superior quality maintenance and upgrades with some kind of sidebar to this particular FAR. Come on give us a break the exorbitant cost of R&D have far and exceedingly outdone that of brain surgeons maybe not baseball players and hockey players . Governance and it's milking of us all must now be Pasteurized.

Anyone who is not immersed in the bureaucratic sewer of DC politics sees with clarity the psychotic and aristocratic socialist state at work. We as a nation only have to watch the mainstream marxist media to see that we have become mired in govt think and corruption on a scale heretofore NOT imaginable by sane rational people. Just take a few minutes and examine the last 16 years of our trip into the sewers of liberal socialist progressiveness and the destruction of law and order and natural human rights to suit govt aggressiveness. The outcomes have been destructive to our very existence. We see the results in every decision by ignorant and subversive politicians that has bled our defense system and our culture into a govt that hates it very own existence and wants desperately to self destruct and take everyone with them. There is no rationality from the white house all the way down the lease to the lowest rung of govt dog.

As everyone knows I am not an US citizen, but raised with the love the values brought by used to be a great country but on the collapse of the Soviet Union everything went South! Soviet countries turned themselves into free market one and Western ones turned into a Soviet State like EU and US with its unelected top officials and lobbyists draining all the tax payers money and making richer the happy few while the middle class got jammed with taxes and rules!

I'm sorry but I don't think liberal, socialist, or progressive ideals are to blame for our current economic problems.
Our socialist and progressive policies have been dismantled by the corporatist Democrats who claim to champion them while representing the private interests of their campaign donors. The only reason the people elect any of the Democrats is because of their liberal views on human rights, which have been the only thing they persue honestly. And even then it's only on issues that don't offend their donors profits.

So the problem is Rockwell is having trouble finding enough meat on the DOD bone? Hmmm, I thought the two things budget-wise that makes America exceptional are what we spend on "defense" and healthcare, so maybe there isn't a "restricting commercial profits" crisis like the author says. Why is there no mention of MIL SPECS that are bloated because of the tendency to load them up just so it looks like someone has been busy? Years ago I saw the same thing as a vendor to CalTrans, a common commercial item had seven parts while the CalTrans version had around forty to do the same job! The reason was it gave engineers something to do, and of course the cost was astronomical for the same reasons-small production runs and WAY too much complexity. Procurement and engineering people should spend more time in maintenance depts, that would clue them into what is REALLY needed spec-wise.

The problem with most commercial systems relevant to the war-fighter, means it is also sold to anyone, including China and Russia, that also use it. Therefore what is the advantage, other than costs? Not to mention if the supply chain is global, and therefore ripe for interference and exploit by nefarious parties. Does anyone not expect China and Russia to borrow Boeing/Airbus and other dual use systems into their into military systems? Heck, even Boeing and Airbus (and tech companies) have centers in China to share anything relevant.

It is losing battle to stay ahead in innovation, and China is also now embedded into most of the next gen commercial relevant military system for the so called third offset like AI, HPC,BIg Data, Cloud, Hacking, and Drones, Sats, ASAT, Imaging. It won't be long before they have lasers and rail guns and hyper-sonics.

US corporations and even the MIC funds all sides, intentionally or not.

During the 2nd world war, they fought all sides with military technology: battle cruisers, airplanes, tanks and all sorts of things. What is the fundamental difference between a Fw-190 and a Spitfire? Nothing except design â€¦ engines, performance, protection and other. What would happen if you exchange the rpm, speed or oil pressure gages between opponents? Nothing either except a few adjustments.

Exchanging between military and civilian components makes a difference only if they can be hacked or easily sabotaged as many people know how to do it. How often does that happen in a military environment with basic technology like display screens, buttons, switches, wiring harness, batteryâ€™s, seats, ladders, tools and even engines, anti-collision devices and weather radars? The military use special techniques justifying special acquisition rules: harden electronics, special radars and communication systems. Also very rare systems never used by commercial firms like weapons, decoys and specialized jet engines. They already make them; the only difference is low production rates. It seems so easy to see what justifies special acquisition rules that the whole thing seems like a fairy tale popped out of the blue since how many years?

Just the title of the article is mystifying: what do you mean by the cost of innovation? Guderian inventing the blitzkrieg didn't cost much, just two way radios and small mechanized units that changed everything!

The Germans didn't invent the tank part of blitzkrieg tactics, the British did. After WW1 they wrote down their experiences and correct tactics for tank warfare in a book and then forgot about it. This book ended up being quite popular with German officers... the rest is history

For me technology is part of the solution you must have as a backbone a good device or vehicle and then you add electronics or software.
Russia and Iran already hacked US drones and made then kiss land on their airbases to steal US technology. Call me what ever you want a drone has a 100% chance to be hacked a pilot nearly zero.
The more advanced you are with technology the weaker you are!

The problem is no one is serious about doing their jobs well in the acquisition train. During the Cold War the Russians scared the bejezzus out of us, so we were serious as a heart attack about "doing the right thing". Now with the US under basically zero threat and us using our weapons to bomb cavemen its all about career and nothing about mission. Ok, I'm exaggerating but its to make a point. I remember when colonels and generals pounded the table and we did everything in our power to get it right. Now its just not important enough to get worked up over. We just let the system run its course and not much good happens.

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